After initially showing a lack of direction, stocks pulled back sharply in late morning trading on Friday. The major averages slid firmly into negative territory following the strong upward move seen in the previous session.
Currently, the major averages are off their worst levels of the day but still sharply lower. The Dow is down 197.89 points or 0.8 percent at 24,074.46, the Nasdaq is down 84.42 points or 1.2 percent at 6,789.55 and the S&P 500 is down 23.93 points or 0.9 percent at 2,623.65.
The sell-off on Wall Street came following reports that former National Security Adviser Michael Flynn has agreed to cooperate with prosecutors in the investigation of Russian meddling in last year’s election.
A report from ABC News said Flynn is prepared to testify that then-candidate Donald Trump directed him to make contact with the Russians.
The report comes as Flynn has pleaded guilty to lying to the FBI about conversations with the Russian ambassador, signaling that he is cooperating with Special Counsel Robert Mueller’s team.
The news about Flynn has overshadowed the latest developments regarding the Senate Republican tax reform bill.
Republican leaders were forced to delay a final vote after the legislation hit a snag, although the latest reports suggest the GOP has rounded up enough votes to pass a revised bill
The outcome of the final vote on the tax reform bill is likely to have a major impact on the markets, as optimism about a corporate tax rate cut has been a key driver behind the run by stocks to new record highs.
On the U.S. economic front, the Institute for Supply Management released a report showing a modest slowdown in the pace of growth in manufacturing activity in the month of November.
The ISM said its purchasing managers index dipped to 58.2 in November from 58.7 in October, although a positive reading still indicates growth in manufacturing activity. Economists had expected the index to edge down to 58.4.
Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee, said faster growth in new orders and production was offset by supplier delivery improvement and declines in raw material inventory.
A separate report from the Commerce Department showed a much bigger than expected increase in construction spending in the month of October.
Extending a recent downward move, semiconductor stocks have shown a significant decline on the day. The Philadelphia Semiconductor Index is down by 2.3 percent after hitting its lowest intraday…